Serena is a director of Rafa Pty Ltd (Rafa). Rafa is performing badly. It has no cash left and

cannot pay wages. Serena decides the best thing to do is buy stock on credit. The goods do not sell and Rafa goes into liquidation (i.e. the liquidator has to wind up the company by selling its free (un-pledged) assets to convert them into cash to pay the firm's unsecured creditors).

Under s 588G of the Corporations Act 2001 (Cth) (the Act), directors are under a duty to

prevent their company from incurring debts while it is insolvent. Serena is prosecuted under

the Act and found guilty of insolvent trading by a single judge in the Supreme Court of Victoria.

She appeals to the Victorian Court of Appeal and the Court of Appeal upheld the single judge's decision and explained its reasons (ratio decidendi).

a. The facts indicate that 'Serena is prosecuted under the Act'. Which classification of law

does this legal proceeding come under? Give reasons.

b. Explain to Serena the effect of the Court of Appeal's decision on any future cases in

Victoria, in other States and in the High Court of Australia.

NOTE: YOU NEED NOT USE IRAC FOR CASE STUDY ONE.

Case study answer guide:

Ensure all the relevant legal rules/principles of law identified and thoroughly defined with concise, and precise accuracy. Analysis/application of the elements of the principles of law is thorough and concisely expressed, without flaw.